© Reuters Morgan Stanley is firmly bearish on U.S. stocks: the market is too optimistic about the prospect of the Fed cutting interest rates
Financial Associated Press News on December 21 (Editor Liu Rui)Although Wall Street is generally optimistic about the prospects for U.S. stocks in 2024, one of the most pessimistic strategists on Wall Street still holds firm in his bearish view, believing that the market has overestimated the speed of the Federal Reserve’s interest rate cut next year and is too optimistic about the prospects for U.S. stocks.
CEO of JPMorgan: Cash will be better than U.S. stocks in 2024
On Wednesday Eastern Time, JPMorgan chief strategist Marko Kolanovic said in a report that investors should favor cash over stocks in 2024 because the Federal Reserve seems unlikely to cut interest rates quickly.
Kolanovich said,Investors are too confident that the United States can avoid recession next year and achieve a soft landing.In addition, the current valuation of U.S. stocks is already high, credit spreads are tight, and volatility is abnormally low. The combination of these factors makes Kolanovich believe that now is not the time to buy stocks in large quantities.
“We remain cautious on risk assets and the overall macro outlook as (the past 18 months)Interest rate fluctuations should have a negative impact on economic activity, coupled with weakening consumer power, rising geopolitical risks and expensive valuations of risky assets,” he said, “Even in an optimistic scenario, we see limited upside for risk assets. “
Since the end of 2022, JPMorgan’s Kolanovich has held a bearish view on U.S. stocks. However, the S&P 500 Index has risen by more than 22% so far in 2023, proving that his view is wrong.
But Kolanovich remains committed to his bearish stance as he expects both U.S. inflation and economic demand to weaken next year, which should hurt stock prices.
The market is too optimistic about the Fed cutting interest rates
In addition, and more importantly, Kolanovich does not agree with the view that the Federal Reserve will cut interest rates aggressively in 2024, because in his view, it is difficult for the U.S. inflation rate to drop from the current 3% to the Fed’s long-term goal of 2%. Target.
After the Federal Reserve’s December interest rate decision, the U.S. stock market went into a frenzy because although the Fed’s dot plot showed that it expected to cut interest rates three times next year, Wall Street investors generally expected the Federal Reserve to cut interest rates faster and more significantly.
In recent days, in the face of investor enthusiasm, many Federal Reserve officials have tried to “pour cold water” on the market through speeches. Many Fed officials have stressed that they will not cut interest rates too early next year. Just on Wednesday Eastern Time, Fed Harker also emphasized this view again.
Kolanovich believes that only a softening of the U.S. labor market can bring inflation back to 2%, which means that the rate cut in 2024 may be smaller than market expectations.
He said:
“We do not expect the Fed to take further tough measures to combat inflation and instead maintain a moderately tightening policy.”
He predicts that by 2024, U.S. stocks will have limited gains and may even fall due to sluggish corporate earnings growth, a reversal in corporate pricing trends, and the possibility of a rebound in volatility after falling to unusually low levels this year.
“After a period of high prices, the recent disinflationary trend should act as a major headwind to corporate margins amid persistent and lagging wage trends. We expect U.S. listed company revenue growth to slow sequentially, Margins will not improve and buybacks will be reduced.”
Kolanovich set a 4,200 price target for the S&P 500 in 2024, which implies a potential decline of 12% from current levels.
2023-12-21 01:03:00
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